Hacker News Reader

Comment by paulpauper | Hacker News Reader

Compare the stock prices. Insurers seme to have done the best, followed by drug companies. Hospitals by comparison have done worse. Insurers have the power to raise premiums to always make a profit , but hospitals are obligated to treat unprofitable patients.

View on HN

Not entirely accurate. Public for profit hospitals have done poorly. “Not for profit” hospital conglomerates have done very very well. it’s just that they’re competing with businesses that don’t pay taxes on profit and pay less taxes on property among other incentives. privately owned hospitals are a mixed bag.

The hospitals required to treat charity patients (to maintain not for profit status) as you say are actually doing the best. Hospitals get most their profits/surplus from surgery.

The article points out that the ACA caps insurer profits at 15%.

A 15% profit doesn’t begin to explain the double cost of American healthcare. The article postulates it’s all the middlemen, which, incidentally, the insurers are acquiring in search of higher profits.

Vertical integration helps reduce the double margin problem. Instead of each middleman needing their own profit margin, a vertically integrated company can earn e.g. 5% on the entire operation. Of course this assumes the new market power is not abused to increase prices more than they would have increased without the vertical integration, or results in damaged choice and quality.

Something like Kaiser is closer to the solution if we don’t have a government led rationalization.

I’m actually not clear that the ACA isn’t tougher than that. The ACA introduced a 85% medical loss ratio. I thought that required them to spend 85% of premiums on payouts. That limits profits to an obvious maximum of 15%, but there are other expenses (advertising and so on) that also cut into that 15%. In practice, maximum profit will be lower than 15%.

That said, I haven’t gone into this in tremendous depth, so I’m kinda hoping someone can confirm or deny my understanding.

The closer you are to the capital, the easier it is to slice off a piece.

Reply on news.ycombinator.com